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New York Forex Report: EZ CPI Miss Prompts ECB Easing Expectations

New York Forex Report: The plunge in China equities not only triggered a trading halt but also prompted broad-based sell-offs in major equities globally. This, coupled with rising geopolitical tension in the Middle-east, resulted in a bout of risk-off sentiments as the new year begins. Weaker than expected manufacturing prints from the US and UK further dampened the already fragile growth outlook. In spite of weakness on the data front, two Fed officials reiterated that US fundamentals remained sound and temporary volatility in the financial markets does not post significant risk to the economy. These Hawkish comments prompted USD buying which has continued over the early European session so far today whilst Equity markets remain weak in the wake of the risk-off tone with which the New Year has started.

Technical: While offers at and just above 1.0950 contain upside attempts expect rotation south to test bids at corrective symmetry objective at 1.0730, expect buyers to emerge 1.0750/30 on the initial test

Fundamental: GBP hit a nine-month low yesterday, as worries that UK growth would not be strong enough to justify an interest rate rise this year, and uncertainties over a possible “Brexit” from Europe also weighed on the currency. UK Dec Construction PMI data printed above expectations but was unable to support Sterling which continues lower heading into the US crossover.

Fundamental: With the turmoil in the Chinese and global equity markets on Monday, EURJPY traded below the 129 mark for the first time in two months and spot remains heavy over early European trading today in light of JPY safe-haven strength and EUR data driven weakness. Wednesday’s services and composite PMIs will be eyed as a further catalyst for further risk off trading which will likely weigh further on the cross.

Fundamental: AUD remains weak over early European trading today as the USD surges following Hawkish Fed comments yesterday and continued risk-off mood despite action from the PBOC to stabilise markets in the aftermath of an imposed trading ban.

Technical: While .7250 caps intraday upside expect a test of .7150 ahead of pivotal.7100. A breach of .7250 opens a move back to test offers at the range highs of.7340

Fundamental: CAD was yesterday weakened by the most in more than two weeks, distressed by a sharp fall in Chinese shares that weighed on commodity-linked currencies and global stock markets. Canada’s manufacturing sector contracted for the fifth straight month as activity fell to a record low in December. USDCAD remains rangebound so far today as Oil trades a sticky range and USD firms.

Technical: Bulls have the ball while 1.37 supports, expect a grind higher to test stops above 1.40 while 1.3840 caps intraday downside. A close below 1.37 would ease the near term bullish bias.